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Myer, David Jones hit by QBE trade credit shift

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Department store chains Myer and David Jones have been hit by QBE’s decision to wind back trade credit cover for the stores’ suppliers from the middle of next month.

Parts of the retail sector have suffered tough business conditions since late March due to store closures and social distancing measures required under Government-imposed restrictions to control the coronavirus outbreak.

“While we appreciate this is a difficult time for these two retailers, we believe this is a prudent course of action in the current market conditions,” a QBE spokesman told insuranceNEWS.com.au.

“We have advised both Myer and David Jones of our willingness to continue to review our position as and when further information about market conditions becomes available.”

The Sydney Morning Herald said today that QBE has advised suppliers of Myer and David Jones that they will halt trade credit cover from July 16 due to the financial risks facing the firms amid the COVID-19 outbreak.

The report says QBE has recently completed a review of the retail industry which has highlighted the department store sector as a “higher-risk category”.

A Myer spokesman says the decision is disappointing, but the company doesn’t believe QBE provides substantial coverage over its business.

“We obviously don’t subscribe to QBE’s view around the future of department stores,” he said. “As our suppliers are aware, we have not changed payment terms during COVID-19 and have and will continue to pay our suppliers according to agreed terms.”

Myer will continue to work with its suppliers in delivering suitable commercial terms with or without trade credit insurance sitting in the middle, he says.

The listed company announced in March that it would temporarily close all stores from March 29 for an initial period of four weeks, which was later extended in line with government restrictions.

It confirmed re-openings last month and said it was taking all necessary measures to minimise costs, including engaging in discussions with suppliers and landlords.

David Jones, which is owned by South African-based Woolworths Holdings, had no immediate comment available.

QBE has previously said it is cutting back trade credit cover in high-risk categories, providing it with the flexibility to provide support for critical industries such as the healthcare sector, food and transport.